Detroit files for bankruptcy

20/07/2013

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"Don't forget the Motor City", Martha and the Vandellas sang on 'Dancing In The Street'. The city that gave birth to Motown Records and much of the American automobile industry is in danger of becoming a forgotten backwater. One of the highest-profile victims of the recession, Detroit has become the largest US city to file for bankruptcy.

Detroit has $18 billion of debt and creditors are fearful that accounts will not be paid. Detroit has listed 100,000 creditors in the bankruptcy claim. Angry city employees believe that it is a tactic to avoid paying back wages, although Mayor Dave Bing has assured workers that they will be paid.

Detroit's slump began with the decline in the American car industry as unwieldy gas-guzzlers gradually went out of fashion and Japanese imports eroded the market. A city heavily reliant on mass employment in the car industry found it impossible to adjust to changing economic times. Estimates suggest that more than 70,000 homes in Detroit have been abandoned after foreclosures or the owners just handing back the keys, although there are signs of a creative industry and service sector revival in the downtown area.

Michigan state appointed emergency manager Kevyn Orr to deal with the bankruptcy. If the measure is approved by a federal judge he will have the power to sell off city assets, and offer creditors ten cents for every dollar owed. This may include the pension plans for retired city workers.

Orr said bankruptcy was the "first step toward restoring the city". Mayor Bing was aware of the public anger. "Paychecks for our city employees will continue. Services will continue," he said. Union bosses were less trustful. Ed McNeil, who represents 33 unions, suggested the bankruptcy was a scheme backed by Republican governor of Michigan Rick Snyder. "This is not about fixing the city's finances," McNeil said. "It's about the governor and his own agenda to take over the city of Detroit."